What is a Multifamily Home?

Read Time: 5 Minutes

|

November 15, 2022

Topics:

What is a Multifamily Home?

These unique homes can come in a variety of forms and configurations. They can be defined as residential properties that contain more than one housing unit. A multifamily house is also referred to as a “multi-dwelling unit.” Examples include duplexes, townhomes, or semi-detached homes.

Row of Houses on Street

In situations where a property owner chooses to live in one of their units, they’re considered an owner-occupied property.

After the initial investment, multifamily homes can also dramatically help build both passive income and long-term wealth for investors. Whether you’re a possible homebuyer or investor, let’s look closely at a few examples of multifamily homes.

Townhouses

In a townhouse, two families live in one house that is separated by an interior wall. Both tenants live in separate units and have separate entrances. Multifamily townhouses offer an excellent investment opportunity and owners don’t need to live there.

They are often a comfortable middle ground between condominiums and detached or semi-detached houses. In situations where there is a homeowner’s association that handles the grounds, living in a townhouse can pay dividends. Particularly for those in colder climes that enjoy watching the snow fall but not having to shovel it.

Even within a multifamily townhouse scenario, tenants will still maintain their privacy since they won’t have neighbors above or below them. Sleeping is generally more restful without someone walking across the floor above, or hearing noise from loud neighbors below.

For real estate investors, townhouses have strong rental potential because they are desirable spaces for many potential renters. The result could potentially be a tremendous long-term wealth-building opportunity.

Duplex

A duplex is a two-story house with a different family living side by side, unlike a townhouse where a wall splits the two living spaces, duplexes can be split up in several ways. In some cases, the residents share a front door, however, each dwelling will have its entrance and there are usually no common areas inside.

They shouldn’t be confused with a twin home even though both contain two attached units. Twin homes are technically classified as single-family homes because twin homeowners own just one-half of the property.

Even though they share at least one wall, residents of duplexes also enjoy plenty of privacy. To extend courtesy, tenants on either side typically don’t place a TV or radio along a common wall. This helps keep the noise level down and helps build the type of bond that duplex renters normally enjoy.  

Although they don’t own the property, duplex renters should also be ready to keep the property in pretty good shape. This includes handling tasks such as snow removal and landscaping as these will typically not be the responsibility of the landlord. If one tenant takes the neighborly initiative of cutting the grass for both parties, it might be a good idea for the other tenant to buy them a pizza. This is yet another great way to help keep things harmonious!

From an investment perspective, a duplex has one owner that rents out and maintains the entire property. This unique multifamily wealth-building opportunity can mean receiving two substantial rent payments from just one space.

Semi-detached house

A semi-detached house is a single family home that is at least partially attached to another home. Unlike a townhouse, residents only share one wall of the house as opposed to sharing multiple walls on either side of the dwelling. They’re like townhouses in terms of square footage, however, semi-detached houses are not configured in rows of three or more. 

For purposes of visual and acoustical privacy, that wall is often designed to be a room that doesn’t need as much privacy as other spots in the house such as the garage, however, it still offers efficiencies in construction and utility.

If both garage doors are open, one can imagine bonding between neighbors who may be washing a car out front or doing a workout in the garage in the open air.

Some semi-detached houses require maintenance, while others are taken care of by an HOA in exchange for fees. Either way, they can be cost-effective and make for a great starter home.

Investors in semi-detached houses would also enjoy receiving two rents from one building and tax benefits that typically include writing off repairs and mortgage interest payments. However, it should be noted that being a landlord also requires a big commitment and being handy with completing home repairs.

Although purchasing a single-family home is less expensive, a multifamily property can provide many great options and revenue streams. Whether you choose to live in one of the units or not, it could be a smart investment for years to come.

Questions about financing and how to get started? We’re always here to help!



Why Newrez?

Newrez believes the lending business shouldn't just be about home loans - it should be about homeowners. That's why our employees get to know our customer's real needs, through final closing, and beyond.

  • Industry leading loan options

  • Simple pre-qualifications and application processes

  • Loans for everyone, from seasoned investors to first-time buyers

  • Putting power back into underserved communities